Re:$3B in Bitcoin was sold in a last-ditch attempt to save U...
by mountainofdeath on Monday May 16, 2022 @02:40PM
(#31401614)
Money Market funds already do this and the collapse of money market funds is usually a harbinger of worse things to come. Money market funds are non-FDIC insured places to park short term cash, typically backed by some combination of AAA commercial paper, municipal bonds and various vintages of T-Bills. Some also are exclusively holding California and New York City bonds and are are totally tax free. Money market funds can do things like suspending redemption in case of a panic to let things settle.
The idea behind USDC is to collateralize it 1:1 like a money market fund provided the underlying bonds hold. Tether is doing fractional reserve banking but has no central bank to act as a lender of last resort. Even then, banks pay into the FDIC which retains reserves itself like any other insurance.
Tether works as long as the money flowing in >= money flowing out.
A severe run on Tether would dry up liquidity very quickly.
The idea behind USDC is to collateralize it 1:1 like a money market fund provided the underlying bonds hold. Tether is doing fractional reserve banking but has no central bank to act as a lender of last resort. Even then, banks pay into the FDIC which retains reserves itself like any other insurance.
Tether works as long as the money flowing in >= money flowing out.
A severe run on Tether would dry up liquidity very quickly.